European Union leaders said Sunday that they made progress and will announce a comprehensive package of measures to tackle the debt crisis on Wednesday. The package is expected to recapitalize European banks, address Greece’s debt burden and boost the firepower of the European Financial Stability Facility, the euro zone’s rescue fund.

The debt crisis “is certainly the main concern,” said Angus Campbell, head of sales at Capital Spreads. “Investors are still waiting for the outcome of discussions.”

Investors also digested news that the preliminary composite purchasing-managers index for the euro zone fell to 47.2 in October, signaling a second successive monthly contraction of the private-sector economy and the fastest rate of decline since July 2009.

The “data from Europe this morning were pretty poor,” Campbell added. “Everyone is talking about recession in Europe again. The likelihood of that has increased.” He noted, however, that a resolution of the euro-zone crisis will boost business confidence.

The losses follow unconfirmed media reports saying that private bondholders may have to take as much as a 60% loss on holdings of Greek debt. That would be substantially higher than the 21% haircut agreed in a July deal.

In Italy, the FTSE MIB index reversed earlier losses to end up 0.7% at 16,232.26. Prime Minister Silvio Berlusconi called a special cabinet meeting for Monday evening after he came under pressure from other euro-zone leaders at a weekend summit in Brussels to do more to boost growth and reduce Italy’s debt burden.

Miners buoyed by China data

In London, the FTSE 100 index (UKX) gained 1.1% to 5,548.06, with miners leading the benchmark higher following data from China showing an expansion in the manufacturing sector in October.

Another big gainer in Europe was Faurecia SA (EO), whose shares rallied 12.3% in Paris after the car-parts maker said its third-quarter sales rose 16% from the year-ago period and confirmed its 2011 goals.

Shares of TomTom NV (TOM2) surged nearly 19% in Amsterdam after the navigation-system maker launched a restructuring program that will include job cuts and reported a rise in third-quarter net profit. The firm also said it expects to deliver full-year results toward the upper end of its forecast.

In Zurich, shares of Nobel Biocare Holding AG (NOBN) rallied 14.4% after unconfirmed media reports said that private-equity firms may make a bid for the dental-implant maker. A spokesman for Nobel Biocare confirmed comments made by the firm’s chairman in the NZZ am Sonntag newspaper stating that there is no existing offer and no respective talks.

In Helsinki, shares of Nokia Corp.
NOK, +3.02%
(NOK1V) rallied 3.8%. Deutsche Bank analysts raised their price target for the mobile-phone maker, though they also maintained their hold rating due to longer-term uncertainty about market share.

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